Wednesday, June 5, 2013

What is more important than the hoopla over Illinois’ recent downgrade (Part 2)? How about eliminating tax loopholes for corporations?

[Breaking a constitutional contract with public employees will not solve the revenue and pension debt problems in Illinois].

Eliminate Tax Loopholes to Increase State Revenue.

Taxes on corporations make up only 5.5% of General Revenue in Illinois. By contrast, individual taxpayers are on the hook for about 53% (2011 Comptroller’s Report, Judy Baar Topinka). Loopholes are a big part of the disparity, and HB 390 eliminates three unnecessary and wasteful expenditures. There are additional 1.5 billion in tax breaks that aren’t included in HB 390.

Consider this list of other corporate tax breaks in Illinois:

Traded In-Property Sales Tax Exemption: 309m;
Biofuels Subsidies: 234m;
Manufacturing and Assembling Machinery Exemption: 184m;
Sales Tax Retailers’ Discount: 116m;
Enterprise, Foreign Trade and Special Zone Incentives: 91m;
CME-CBOE Special Tax Break: 85m;
Offshore Oil Drilling Tax Incentive: 75m;
Satellite TV Tax Exemptions: 75m;
Extended Estate Tax Exemption Increase: 64m;
Farm Chemical Exemption: 50m;
Non-Sales Tax Collection Discounts: 47m;
Manufacturer’s Purchase Credit: 38m;
Newsprint and Ink Exemption: 33m;
Rolling Stock Exemption: 25m;
Individual Income Tax Credit and Subtractions: 21 m;
For-Profit Hospital Tax Credit: 15m;
Research and Development Credit: 13m;
Film Production Services Credit: 12m;
Digital Goods Exemption: 10m;
Graphic Arts Machinery and Equipment Exemption: 8.3m;
High Economic Impact Business Investment Credit: 4.3m;
Purchase of Electricity from Solid Waste Energy Credit: 2.2m;
Job Training Contribution Subtraction: 0.5m…

Across the state, Illinois voters want their elected officials to close corporate loopholes: by a 19 point margin, voters statewide believe taxes on big corporations are too low. Voters in South Suburban Chicago districts agree by a 17-point margin. Voters in North Suburban Chicago districts agree by a 14-point margin. Voters in Downstate districts agree by a 17-point margin. Voters in Central Illinois districts agree by an 18-point margin.

In addition, 72% of Illinois voters say “politicians have been giving big handouts to big corporations” (GSB Strategies Survey of Illinois Voters, November 2012).

Most importantly, studies have shown that closing these loopholes will not “hurt business” or “drive jobs out of Illinois.” In the 10-year period from 2001 to 2011, 10 of 15 states with corporate income taxes that had the best record of retaining manufacturing employment required combined reporting. Among these states are Illinois neighbors Michigan, Wisconsin and Indiana (Michael Mazerov, Center on Budget and Policy Priorities, Testimony before MD Senate Budget Taxation Committee, Feb. 22, 2012).

Neighboring states Wisconsin, Michigan and Indiana have also de-coupled from the Federal Domestic Activities Production Credit and have not witnessed negative economic effects. Corporate taxes represent an average of only 0.2 to 0.4% out of a corporation’s total expenses, hardly ever enough to justify the expenses and logistics of relocation or pulling a business out of a state (“Cutting State Corporate Income Taxes Unlikely to Create Many Jobs”, Center on Budget and Policy Priorities, September 14, 2012).

Corporate entities are far more interested in settling in states with educated workforces, solid infrastructure and public services, which requires significant public investment. Corporations’ investment decisions are driven by demands for their products and services, not by the need for more tax breaks (“Options for Responding to Short-Term Economic Weakness”, CBO, January 2008, pp. 13-14).

The aforementioned information is from IFT/AFT.

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